FOMC meeting: what to expect?

The US dollar keeps edging lower amid speculation the Federal Reserve will affirm its commitment to maintaining bond purchases when it announces its policy decision today at 18:00 GMT. Dollar index dropped to a fresh 8- week low. EUR/USD is trading slightly below the $1.3200 resistance.

Earlier this month investors were conceding that the Fed could unwind the open-ended bond buying. However, series of downbeat data released in April changed the market sentiment: now FOMC is widely expected to maintain the $85 bln monthly asset purchases. What is more, some speculators even expect the Fed to increase QE volumes in order to support the economy.

BK Asset Management: FOMC rate decision won’t have any strong influence on the US dollar. None of discussions of hawks and doves will appear in the policy statement.

Economists surveyed by Bloomberg now expect the Fed to reduce monthly bond buying in Q4 from $85 bln to $50 bln. Deutsche Bank analysts emphasize that stimulus withdrawal is an “unprecedented territory” for the regulator, so it is unlikely to taper purchases in the next few months. Cutting purchases by about a third would allow the Fed to assess the reaction of the economy and investors.